JIM ZARROLI, BYLINE: Homeowners with mortgages are supposed to have property insurance. But sometimes they let their policies lapse, usually because they can't afford them anymore. And that triggers an unfortunate series of events, says Bob Hunter of the Consumer Federation of America. Hunter says as soon as the policy expires, the homeowner hears from the bank.

BOB HUNTER: They warn you with a letter, and then after a couple of letters, they then get a policy for you. It's called forced placed insurance. They are forcing the insurance on you.

ZARROLI: Hunter says between 2004 and 2011, homeowners were forced to spend $16 billion on these policies. Very often, the bank arranges them by going to favored insurance companies. And in exchange for giving these companies their business, the banks make big commissions and fees, fees that are then passed on to the homeowner.

HUNTER: You may pay double or triple or even more for your insurance when you're forced placed. And a lot of that money that you're paying is actually ending up as profit to the bank.

ZARROLI: Recently, states like New York and California have taken steps to limit the fees these banks can charge. Today, the FHFA weighed in, issuing rules that bar banks from earning commissions when they arrange insurance policies. The move was part of a broader effort by the agency now getting underway to look at lender-placed policies.

The FHFA is doing this because it oversees Fannie Mae and Freddie Mac, which buy most of the countries mortgages. Hunter says Fannie and Freddie are directly affected when homeowners are feeling financially squeezed, which has become an especially big problem in the wake of the housing crisis.

HUNTER: There were a lot of people who generally became unable to keep up with their bills and drop their insurance as a way to try to survive and then, of course, got in worse shape because then the forced place might push some of them into foreclosure.

ZARROLI: Of the two biggest insurance companies that write most lender-placed policies, one of them, QBE, declined to comment today. The other, Assurant, issued a statement saying it looked forward to working with regulators over the next few months as they overhaul insurance rules. The American Bankers Association also issued a statement. It said it was concerned about the effect that the reforms would have on small loan servicers and their ability to help homeowners get insurance. Jim Zarroli, NPR News, New York. Transcript provided by NPR, Copyright NPR.